This document provides information about establishing investment entities in Indonesia for foreign companies. It discusses the two main legal entities that can be chosen: a foreign representative office or a PT PMA corporation. A representative office allows a company to conduct market research and coordination but not generate revenue. It also describes the four types of representative offices (general, trade, construction, and bank) and their permit requirements.

1. DOING BUSINESS IN INDONESIA
HOW TO DO INVEST IN INDONESIA
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Since 2012

2. Investment in Indonesia
Indonesia has one of the most regulated markets in the world.
Despite the recent improvements, it is still relatively hard for
foreigners to fully capitalize on market potential.
Our mission is to make investment in Indonesia easier for
foreigners. There are two legal entities that can be chosen for your
investment in Indonesia: Foreign Representative Office and PT.
PMA.
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3. Investment in Indonesia
A foreign company may establish a representative office in
Indonesia in one of the province capitals. Its activity is limited to
supervising and coordinating the business of its principal and
branches but representative office in Indonesia is not allowed to
make any business transaction with companies or persons in
Indonesia either for export or import or domestic trading, but the
representative office can:
• Obtain work permits for expatriate managers
• Obtain multiple entry visas for its expatriate personnel as well as
exemption from exit-tax (SKFLN).
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4. Investment in Indonesia
For foreign investors interested in exploring business opportunities
in the Indonesian market, a representative office might be an
efficient way to begin. Basically, it helps your company set up a
branch, but with some major restrictions.
This form of business entity does not allow you to generate
revenues or do business directly under the name of the
representative office. To open a representative office, you should
have an existing parent company overseas to manage
the representative office in Indonesia. The majority of representative
offices focus on conducting market research activities as well as
marketing and promotion through selling or buying agents.
Some foreign investors prefer to set up a representative office first to
grow the market in Indonesia before establishing a PT. PMA.
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5. The representative office is led by one or more foreign or Indonesian
citizens who are appointed by a foreign company or joint foreign
companies as their representatives with the intention of:
• Handling the company or its affiliates concerns, and or
• Preparing the establishment and development of foreign direct
investment companies, in Indonesia or in other countries and
Indonesia.
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Investment in Indonesia

6. Advantage of Representative
Office in Indonesia
If you do not have prospective clients yet in Indonesia and want to explore
your business perspectives in this country (through conducting market
research), it might be better to open a representative office first (instead of a
company). There are various advantages and disadvantages of opening a
representative office in Indonesia.
Advantages
• It is relatively easy and quick to set up
• No need for large investments or paid up capital
• Less paperwork; you only need to report income tax for the employees as
well as (rented) office space tax
Disadvantages
• You are not allowed to generate revenues, profit or engage in sales
directly
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7. Four Types of
Representative Office
Although the revenue restrictions seem like a major disadvantage, you can
still pursue other activities with an agent for the parent company, supervise
the activities of your subsidiary/distributor, or simply do market research
before deciding to enter Indonesia and set up a PT. PMA. It actually
depends upon the type of representative office.
There are 4 options to consider:
1. Foreign Representative Office
2. Foreign Trade Representative Office
3. Foreign Construction Representative Office
4. Foreign Bank Representative Office
While the first two options are used by vast majority of the companies, we
also provide information about Foreign Construction Representative Office.
The Foreign Bank Representative Office is a very rarely selected option.
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8. 1. Foreign Representative Office
(KPPA)
Establishing a foreign representative office (Kantor Perwakilan
Perusahaan Asing – KPPA) allows you to basically create a market
presence without almost any money.
A Foreign Representative office is more general than
a Foreign Trade Representative office and is usually set up for
management reasons. The role is limited to: Supervising, managing,
liaising, coordinating, and representing the parent company.
From a legal point of view, it is relatively simple to establish such a
presence in Indonesia. You must submit an application to the
Indonesian Investment Coordinating Board (BKPM).
This can be done either by the director or manager of the foreign
company, or by the director candidate in Indonesia on behalf of the
foreign company of the new representative office, who must be
appointed prior to establishing a presence in Indonesia. Another option
could be a power of attorney.
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9. This process may look simple, but there are several steps considered to be
a part of the application that will certainly take you some time. Make sure
you review the following points completely:
1. Appoint a business representative (expatriates are acceptable)
2. Collect all the documents needed
• Notarized letter of intent
• Notarized letter of appointment
• Letter sof reference
• Resume and work permit of the company representative
3. Submit application to BKPM
After all of the paperwork is complete, BKPM will issue the license, usually
within one month. The license is valid for three years and until September
2013 could be extended for a maximum of two years. With the new
regulation BKPM 12/2013, there are no limitations on extension of the
license.
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1. Foreign Representative Office
(KPPA) …the continuation

10. 2. Foreign Trade Representative Office
(SIUP3)
In accordance with the Minister of Industry and Trade Decree
No.: 402/MPP/Kep/11/1997. All foreign Trade Companies or Joint
Enterprise (Association) of foreign companies that are willing to open their
representative office in Indonesia, are required to obtain a license SIUP3A
(Surat Izin Usaha Perwakilan Perusahaan Perdagangan Asing) from the
Ministry of Industry and Trade of the Republic of Indonesia.
Only Foreign individuals or Indonesian individuals with high educational
background and experience are eligible to manage the Representative
Office.
The function of this individual is to serve as Head of Representative Office
or Assistant to Representative and the educational background must be at
least university graduated or equal to university graduate with 3 years
experience in the field where she/he will be posted.
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11. The Representative Office can act as selling agent and/or
manufacturing agent and/or buying agent of their principal. In which
the detail of their activities should be applied in accordance with
article 3, The Minister of Industry and Trade Decree
No. 402/MPP/Kep/11/1997 that is for the promotion and market
research of import or export products.
Foreign expatriate who is intended to work at the Representative
Office either as Head of Representative or as Assistant to
representative are subject to The Minister of Man Power Decree No.
Kep 682/MEN/85 regarding his/her working permit.
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2. Foreign Trade Representative Office
(SIUP3) …the continuation

12. As the name already implies, this kind of representative office is used for
trading as well as marketing.
The permitted activities of a Foreign Trade Representative office with an active
permit SIUP3A (Surat Izin Usaha Perwakilan Perdagangan Asing) are as
follows:
1. Act as a buying or selling agent
2. Conduct market research and create promotional materials
It is necessary to understand that neither a Foreign Representative office, nor a
Foreign Trade Representative office allow you to really do business. You are
not permitted to sign or enter into any contracts, generate revenues or even
engage in the management of a company in Indonesia.
In order to establish a Foreign Trade Representative office, you follow the same
process as for Foreign Representative office (KPPA). The difference is that in
this case, all documents such as the Letter of Intent or Letter of Appointment
must be signed by a notary in the country of origin and legalized by the
Indonesian Ministry of Foreign Affairs.
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2. Foreign Trade Representative Office
(SIUP3) …the continuation

13. 3. Foreign Construction Representative
Office (SIUJK)
Unlike the previous two cases, the construction sector is regulated by
Ministry of Public Works and also partially by BPKM. A permit (surat izin
usaha jasa konstruksi – SIUJK) is required to operate in the construction
area.
It is important information to note that only large companies can qualify
for the license, which is issued for three months with the possibility of
extension. In late September, the Minister of Public Works (Minister) issued
Minister Regulation number 10/PRT/M/2014 regarding Guideline
Requirements for Giving Permission Foreign Construction Service
Representative Office (New Regulation).
The New Regulation for construction representative offices in Indonesia
replaces the old Minister regulation 05/PRT/M/2011 (Old Regulation) which
had a similar title. The New Regulation has become more comprehensive
than the Old Regulation. The New Regulation sets clear requirements for
the distribution of work between the Foreign Construction Representative
Office and the Indonesian construction company.
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14. Unless regulated differently by a related authority, for construction work
the distribution of work in a Joint Operation is as follows:
1. At least 50 percent of the value of construction work is performed in
Indonesia; and
2. At least 30 percent of the value of construction work is performed by the
Indonesian construction company.
For construction planning work, the distribution of work in a Joint
Operation is as follows:
1. The entire technical planning work is performed inside Indonesia; and
2. At least 50 percent of the value of construction planning work is performed
by the Indonesian construction company.
The Foreign Construction Representative office allows you to:
1. Do market research and contact institutions and companies
2. Be involved in procurement of construction services
3. Appoint local and foreign manpower to head the office
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3. Foreign Construction Representative
Office (SIUJK) …the continuation

15. What is needed to establish a Foreign Construction
Representative office in Indonesia?
First, the application and all the necessary documents, must to be submitted
to the Ministry of Public Works and the administration fee must be paid. The
fee can amount to either $5,000 in the case of construction consultancy
services sector, or $10,000 if target sector is construction implementation
services.
The company applying for an SIUJK licence also has to do a lot of
paperwork. Apart from the same requirements as for a KPPA, several items
must be submitted along with the application to prove that the company
setting up the office has a good reputation, is big enough etc.
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3. Foreign Construction Representative
Office (SIUJK) …the continuation

16. 4. Foreign Bank Representative Office
in Indonesia
A foreign bank can open a representative office in Indonesia to act as a liaison office
between the foreign bank and its customers in Indonesia. This type of representative
office is regulated and monitored by Bank Indonesia, the Indonesian central bank. As a
liaison office, the representative office cannot conduct banking activities in Indonesia, and
is only allowed to:
1. Provide information to third parties within Indonesia on requirements and
procedures for establishing relations with its principal office/branch offices outside
Indonesia
2. Assist its head office/branch offices outside Indonesia in supervising credit collateral
in Indonesia
3. Act as proxies in making contact with institutions/agencies to represent the interests
of its head office/branch offices outside Indonesia
4. Act as supervisors of projects within Indonesia which are partially or wholly financed
by its head office/branch offices outside Indonesia
5. Undertake promotional activities
6. Provide information on Indonesian trade, economic matters, and finance for foreign
parties or vice-versa; and · assist Indonesian exporters in obtaining market access
outside Indonesia through international network of banks affiliated with the
representative office or vice-versa.
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17. The procedure for opening a representative office in Indonesia refers to
Decree of Director of Bank Indonesia No. 32/37 /KEP/DIR dated 12 May
1999.
Here are the highlight guidelines of the procedure:
The opening of a representative office must have permission from Board of
Governor of Bank Indonesia. Bank that intends to open a representative
office in Indonesia should have total asset which ranks top 300 in the world,
which could be refer to the bank rank’s that issued by credible international
agency. The application letter should be signed by the Director of the bank
and addressed to the Board of Governor of Bank Indonesia.
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4. Foreign Bank Representative Office
in Indonesia …the continuation

18. The application letter should also mention the reason to open a representative
office in Indonesia. The application should be accompanied by: a copy
document that mentions total asset of banks is ranks top 300 in the world, the
letter of assignment from Head office to the candidate of head of representative
office in Indonesia, the curriculum vitae of the candidate of head of
representative office in Indonesia, the letter that stated the candidate of head of
representative office will work exclusively for the bank (no double position in
any other companies), the letter that stated no objection from banking authority
where the head office located, to open a representative office in Indonesia. The
letter of objection / no objection to open a representative office in Indonesia will
be given by Bank Indonesia within 30 days after all complete application is
received by Bank Indonesia.
With regard to the application process, Bank Indonesia will 1) check the
completeness and accuracy of the documents 2) conduct interview with
the candidate of head of representative office.
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4. Foreign Bank Representative Office
in Indonesia …the continuation

19. Investment in Indonesia
Cekindo registers dozens of foreign-owned companies every month
and our legal team is ready to assist you!
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20. PT. Cekindo Bisnis Grup
Menara BCA Grand Indonesia 50th fl
Jl. MH. Thamrin No. 1
Jakarta Pusat 10310, Indonesia
info@cekindo.com/ +6221 580 6889
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Why Cekindo?
PT. Cekindo Bisnis Grup is a market entry consulting firm in
Central Jakarta, providing one-stop services to assist foreign
companies from various industries in expanding to Indonesia
and beyond
Our main services, include Business Set Up, Business
Process Outsourcing, and Local Representation; more info
on www.cekindo.com
Our dynamic multinational team based in Jakarta to
understand the local market and utilize our extensive network
to support our client’s business and operation in Indonesia

21. PT. Cekindo Bisnis Grup
Menara BCA Grand Indonesia 50th fl
Jl. MH. Thamrin No. 1
Jakarta Pusat 10310, Indonesia
info@cekindo.com/ +6221 580 6889
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